Freeport-McMoRan 2009 Annual Report Download - page 26

c. Includes charges to revenues for mark-to-market accounting adjustments on the 2007
copper price protection program totaling $175 million ($106 million to net income
attributable to FCX common stockholders or $0.27 per share) and a reduction in 2007
average realized copper prices of $0.05 per pound.
d. Includes long-lived asset impairments and other charges totaling $11.0 billion ($6.7
billion to net loss attributable to FCX common stockholders or $17.52 per share),
goodwill impairment charges totaling $6.0 billion ($6.0 billion to net loss attributable to
FCX common stockholders or $15.69 per share), and charges for LCM inventory
adjustments totaling $782 million ($479 million to net loss attributable to FCX common
stockholders or $1.26 per share). Refer to Notes 2 and 6 and “Critical Accounting
Estimates – Impairment of Assets” for further discussion.
e. Includes the impacts of purchase accounting fair value adjustments associated with the
acquisition of Phelps Dodge, which were primarily because of increased carrying values
of acquired property, plant and equipment and metal inventories, including mill and
leach stockpiles, and also includes amounts for non-operating income and expense
mostly related to accretion of the fair values of assumed environmental obligations
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including $1.0 billion to operating loss and $93 million for non-operating income and
expenses, ($679 million to net loss attributable to FCX common stockholders or $1.78
per share) in 2008 and $1.3 billion to operating income ($793 million to net income
attributable to FCX common stockholders or $2.00 per share) in 2007. Refer to Note 20
for a summary of the impacts of purchase accounting fair value adjustments on our
business segments for the years ended December 31, 2008 and 2007.
f. After noncontrolling interests and preferreddividends.
g. Includes charges of $43 million ($0.09 per share) for the partial settlement of the City of
Blackwell lawsuit (see Note 14), and also includes a favorable adjustment to income tax
expense totaling $43 million ($0.09 per share), resulting from the completion of a review
of U.S. deferred income tax accounts.
h. Includes net losses on early extinguishment and conversions of debt totaling $43 million
($0.09 per share) in 2009 associated with the redemption of our $340 million of 67/8%
Senior Notes and open-market purchases of our 8.25% Senior Notes, our 8.375%
Senior Notes and our 8¾% Senior Notes, $5 million ($0.01 per share) in 2008
associated with an open-market purchase of our 9½% Senior Notes and $132 million
($0.33 per share) in 2007 primarily related to premiums paid and the accelerated
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to Note 10 for further discussion.
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Stock (which converted into 17.9 million shares of FCX common stock in September
2009) and 6¾% Mandatory Convertible Preferred Stock (refer to Note 12). In addition,
the 2009 period includes the effects of the 26.8 million shares of common stock we sold
in February 2009. Common shares outstanding on December 31, 2009, totaled 430 million.
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costs (net of by-product credits) for all copper mines, excluding net noncash and
nonrecurring costs and Africa mining. For reconciliations of the per pound costs by
operating division to production and delivery costs applicable to sales reported in our
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“Product Revenues and Production Costs.”
Revenues
Consolidated revenues include the sale of copper concentrates,
copper cathodes, copper rod, molybdenum, gold and other metals by
our North and South America copper mines, the sale of copper
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silver) by our Indonesia mining operation, the sale of copper cathodes
and cobalt hydroxide by our Africa mining operation, the sale of
molybdenum in various forms by our Molybdenum operations, and
the sale of copper cathodes, copper anodes, and gold in anodes and
slimes by Atlantic Copper. Our mining revenues for 2009 include
sales of copper (approximately 75 percent), gold (approximately
17 percent) and molybdenum (approximately 5 percent).
Consolidated revenues totaled $15.0 billion in 2009, compared
with $17.8 billion in 2008 and $16.9 billion in 2007. Following is
a summary of year-to-year changes in our consolidated revenues
(in millions):
2009 2008
Consolidated revenues – prior year $17,796 $16,939
Higher (lower) sales volumes from mining operations:
Copper 121 2,367
Gold 1,141 (671)
Molybdenum (395) 505
Higher (lower) price realizations from mining operations:
Copper (288) (2,631)
Gold 349 235
Molybdenum (1,056) 266
Lower purchased copper and molybdenum (1,414) (5)
(Lower) higher adjustments, primarily for prior year
provisionally priced sales(239) 309
Lower Atlantic Copper revenues (449) (47)
Impact of the 2007 copper price protection program —175
Other, including intercompany eliminations (526) 354
Consolidated revenues – current year $15,040 $17,796
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Consolidated sales volumes totaled 4.1 billion pounds of copper, 2.6
million ounces of gold and 58 million pounds of molybdenum in 2009,
compared with 4.1 billion pounds of copper, 1.3 million ounces of gold
and 71 million pounds of molybdenum in 2008. Higher copper sales
volumes in 2009, when compared with 2008 (45 million pounds),
primarily resulted from mining in a higher grade section of the
Grasberg open pit and the contribution of 2009 sales volumes from
the Tenke Fungurume mine, partly offset by lower sales volumes as a
result of production curtailments at the North America copper mines
and lower ore grades at Candelaria. Mining in a higher grade section
of the Grasberg open pit also resulted in substantially higher gold
sales volumes in 2009. Lower molybdenum sales volumes in 2009
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Refer to “Operations” for further discussion of sales volumes at our
operating divisions.
Consolidated revenues in 2009 were also impacted by lower
copper and molybdenum prices compared to 2008. Realized copper
prices decreased in 2009 to an average of $2.60 per pound,
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molybdenum prices decreased to an average of $12.36 per pound in
2009, compared with $30.55 per pound in 2008. Partly offsetting
lower copper and molybdenum prices were higher realized gold
prices, which increased to an average of $993 per ounce in 2009,
compared with $861 per ounce in 2008.
We primarily purchase copper cathode to be processed by our Rod
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mines does not meet customer demand. Accordingly, the decrease in
purchased copper for 2009, compared to 2008, resulted from lower
demand.
Under the long-established structure of sales agreements
prevalent in the industry, substantially all of our concentrate and
cathode sales are provisionally priced at the time of shipment. The
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period (generally one to four months from the shipment date) based
MANAGEMENT’S DISCUSSION AND ANALYSIS
24 FREEPORT- McMoRan COPPER & GOLD INC.
2009 Annual Report